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Risk data should be available to investors without restrictions: behavioural assessment findings

15 October 2021

Notices of high-risk orders received by non-qualified investors are more efficient when they are comprehensive rather than in a brief form suitable for sending as a text or push message. 

These are the findings of a behavioural assessment carried out by the Bank of Russia when developing the procedure for testing individuals before they get access to transactions with complex financial instruments. The Bank of Russia will factor in the assessment findings in the future when elaborating the regulation aimed at financial consumer protection. 

According to the assessment, information on risks has a cooling effect, making respondents less willing to invest funds in financial products they do not know. However, a person might become considerably less cautious even when a barrier is minor, e.g. when information is provided through a link, rather than directly in the notice of a high-risk order. 

A broker shall send a notice of a high-risk order to the investor and receive a confirmation of risk acceptance if the individual earlier failed to pass a test on one of complex financial instruments. In this case, the broker may offer the investor to resort to the ‘last word’ principle, that is, conduct a transaction to an amount of no more than 100,000 rubles (or to an amount of one lot of securities or one security, if its value exceeds 100,000 rubles).

Following the results of the assessment and the discussion with market participants, push and text notices of risks have been replaced with full-text notices. Moreover, the Bank of Russia has prepared a form to be filled in by investors personally if they confirm risk acceptance.